Slashdot Mirror
Whatever Happened to Micropayments?
prostoalex writes "Remember Flooz? Or Beenz? With a few notable successes (PayPal, and that's about it) online micropayment industry is saving its success stories for future generations. New York Times reports about two nascent micropayment systems, one coming out of Stanford, one out of MIT, that are supposed to help the content producers and Internet users to engage in less-than-a-dollar financial transactions without huge overhead costs, so typical of credit card payments. BitPass requires you to purchase a virtual debit card with a certain amount on it to pay for products and services, and PepperCoin consolidates numerous micropayments into one bill that is then split between the content providers that managed to sell their product to the Internet user." I still believe that single penny transactions will revolutionize the net.
They were monopolized and price-fixed by ebay, just like online auctions were. Have you looked at the prices for paypal and ebay auctions recently??
--
1-800-759-0700
Paypal also had a lot of marketting muscle and a catchy name.
To top this off, Paypal also started to guaranty their purchases.
It also ended up being the way that Paypal was used for other payment services because of the debit card that allowed it to prosper. I would for instance use my Paypal card to pay Billpoint or PayDirect if it was offered. This would get me 1.5% back.
StormPay and C2it are the services frauds use. Bidpay is reasonable, but never use it to pay for anything just to be paid.
The author misses Paydirect, which controls Yahoo payments. This is a decent service and is in some ways a superior "eshopping cart" service. Many small websites or discount hardware websites use Yahoo stores and the PayDirect service.
I do agree with the author that "penny payments will revolutionize the internet though" - I see the internet broadband/wifi/otherwise being free in most cases within 10 years. I see ISPs as selling "credit cards" rather than subscriptions. These cards would allow you to send and receive email and view websites. The ISPs in turn act as a bank for websites such as Slashdot. Paying them for the number of views that have crossed their service say 1/100th of a cent for every page view.
I think email should cost 1 cent to send, 1 cent to receive. I think it should be 1 penny each page/email view or bulk 1000/100MB /views for $1 -- 10,000/ MB/ views $10 -- 100,000/MB / views $50 - therefore sites that want to remain free can, sites that want to charge can almost transparently.
Yell & scream & rant & rave... it's no use... you need a shaaaave ~ Bugs Bunny
I know that somebody always mentions Apple in /. stories nowadays, but does anyone know how they overcame the micropayment issue with their iTunes Music Store? I would think that some lessons could be gleaned from their experience with it.
Slashdot's first reaction to VMware
If we are going to have the concept of micro-payments, why can't we have micro-content providers?
I regularly post to Slashdot. I am essentially a micro-content provider to Slashdot. I have posted over 800 comments, many of them high Karma scorers. If I made, say, one cent per Karma point, then I would be about 30 dollars better off by now! Woohoo!
I've started leaving the spare change when I buy little stuff like coffee, takeout food, and trinkets at small shops. Imagine what would happen to the economy if everybody left their 37 cents after buying coffe? The people working minimum-wage at the coffee shops would be making over $30/hour! I think 'micropayments' in real life (not online) could seriously revolutionize the economy, it would finally give the poorest amongst us the ability to make decent (and tax-free) earnings.
"Sometimes, I think Trent just needs a cup of hot chocolate and a blankie." -Tori Amos on Nine Inch Nails
Once a micropayment company becomes really successful, Paypal will buy them out, and integrate their services with Paypal's. This will make them the de facto standard on the Internet, and the other micropayment companies will die.
The big problem for micropayments is this: Are they automatic?
If people have to take deliberate action to spend a penny, it's not going to work; at $7.20/hour, if it takes them five seconds to read and respond to a prompt, they've spent more in their time than the penny they're paying.
However, if the payments are made automatic, a different problem takes over: People aren't culturally ready for having their money spent, by a computer, on their behalf. Never mind that every time their thermostat turns on, it's spending their money -- that's sufficiently hidden from the users.
The only way I can see micropayments becoming mainstream is if they are refundable within a given time limit -- but that would only work if people don't start "charging back" all their payments.
Tarsnap: Online backups for the truly paranoid
THANK YOU! It is obvious, and it's been a problem for a while now. Online transactions aren't the only problem. We have a plastic currency society now, paper money is all but obsolete (though IMHO there will always be a place for it). In order to function now, it is arguably necessary to have a credit or debit card, yet private companies control who can and can't have one, and on what terms. It's just the same as if one person could use a $20 bill free of charge because they're "good" at using money, but another person had to pay $1 out of every $20 to someone else because they're "bad" at using money, and then there's the person who simply isn't allowed to use money at all because he doesn't have much to start with and he's been very bad at using it correctly in the past!
Governments should absolutely be moving with the times and providing transaction-fee-free plastic money and online money. Currency should be as neutral and transparent as possible, in order to facilitate a smooth and efficient marketplace. We've always supported the overhead required to create and manage the paper money, we should do the same for modern currency.
~
"A foolish consistency is the hobgoblin of little minds." -Emerson
Dear Slashdot: next time you want to mess with the site, add a rich-text editor for comments.
The big problem with Shirky's analysis is that he makes no distinction between payments of, say, half a cent, and payments of a dollar or more. And that's a major flaw in his argument.
In the real world, Shirky's argument translates to: "No one will buy a candy bar for 50 cents because they will be paralyzed by the user overhead." And, of course, we know this wrong. The candy industry (just to give an example) makes millions of dollars of profit a year selling 50 cent candy bars.
Likewise, there is a legitimate zone of value for digital content that falls between a dime and a couple bucks. 50 cents for an online comic you like, or for a song from a band you want to support, isn't any different than 50 cents for a candy bar.
Micropayments are just payments. And I think it'll be funny if, in a couple years, the artists and writers and bands who are making money off of micropayments can read Clay's article and have a good laugh.
He who refuses to do arithmetic is doomed to talk nonsense.
E-gold and the half-a-dozen or so clones of that system work quite well, *if* you're dealing with a userbase which already have accounts.
(E-gold, for those who are unfamiliar, consists of 1,500 Kg of gold in various depositories, and a database for keeping track of who owns which fraction of that gold. As currency enters or leaves the system new gold is bought on the open market, or liquidated from the reserves: i.e. it's a real currency, just like the dollar used to be)
Payments are possible down to 0.3 of a cent, and the system has been around for years.
Given that this technology has been around for years and works exactly as a micropayment system should, this raises two questions about why it isn't everywhere:
1> Can a micropayment system work at all? Given this system has all of the necessary properties, and isn't used universally for micropayments, is the model just broken?
(actually: I just checked the E-gold system statistics and it looks like they moved 22000 transactions for less than 10 cents yesterday alone so perhaps that counts as a functioning micropayments system? But if it works just fine, what's limiting it's growth?
2> Is it possible that any micropayment system needs to be universal before it can be used? Even though there have been various past and current schemes which were technologically feasible, does it require a PayPal-sized entity to start offering micropayments before there is enough of a userbase to make it feasible to charge for things?
$0.02, no pun intended
I've been wondering about this since it opened... and I haven't had my account long enough to find out for myself. Maybe $0.99 isn't a micropayment, but it certainly is a minipayment.
I've been hearing for years that the cost of handling credit card payments makes it impractical to use it for purchases of less than about $10. So how does Apple do this?
Certainly a big appeal of the Music Store is that you pay only for what you use and are NOT saddled with an automatic $5.95 or $8.95 per month.
Do they batch them? Do they actually lose money on someone who only buys one song a month, and gamble that most users will buy more than that?
"How to Do Nothing," kids activities, back in print!
The overhead of paper money is FAR less than plastic. Money is made and released, and the governments obligation ends there.
With plastic the government has to become a bank (the money the card represents has to be managed by somebody). This implies that people have the ability to get money into the bank (direct deposite, tellers, etc..). That's big money right there.
Then there is the question of fraud.. with money there is no question. Posession almost entirely determines ownership of paper money. When someone robs you, it is a criminal matter. However, if you don't catch the crook you don't get the money back. With plastic fraud is much easier to get away with (you just need a number after all), and so government has to support THAT as well.
So the government is going to have to get into the banking business... which is not something I beleive it should stick it's nose in. Let it make the currency, leave it to the private sector to manage that currency.
Turn s60 photos into awesome videos with mScrapbook for all S60 3rd edition phones!
On the one hand, there's a faction trying to eliminate the penny in the US because it's nearly worthless (nothing costs <$0.05 anymore). On the other hand, people are trying to figure out how to charge micropayments on the net. Aren't these opposite approaches to the same problem?
It seems to me that when a commodity gets cheap enough, people are willing to pay a flat fee for nearly unlimited usage. The most obvious example is phone service. Do you think people will ever really want to spend their money in tiny increments? I don't.
At my local(San Diego) kinkos I can use a credit card at the copier. You simply insert the card in the card reader and make the copies. I recently made 60cents worth of purchases and when I got my bill(AMEX)it was truly 60cents. Obviously kinkos has worked something out with the major card companies or they are just eating the fees on low end purchases.
On the good part: the control of the contents is in the hands of the clients, not the sponsors. Better content will win. They liberate us of the danger of bad subscriptions... lots of times one can tell whether the site sucks or not in a couple of clicks, and what now would be a US$20 subscription could be a couple of micropayments. They also would liberate us of the "subscriber-only" links that appear around here :)
But: nice to see how you manage to get the transaction overhead below the US$0.01, although this can be done with "virtual credit accounts". And while supporters can argue that we already use micropayments, like for water and electricity, there's a little detail that gets no airtime: most of the things that work on micropayments are monopolies or cartels. Remember dial-up internet? Pay as you use? Once flat-fee came into the block, pay per use went out fast... as the flat-fee guy rakes in the money.
Other issue that can be seen with micropaymentes is the fact that they clutter our surfing experience. There is, your previously unencumbered surfing now is awash with little transactions. Plus the confusion factor: the idea is to embed the micropayments into the links, so that it is automatic. So, you have this link that a) has you assess if it's worth to click that link and at the same time b) tells you it costs so little that it's nothing.
This working scheme that tries to save everything *but* the user's time doesn't sound so hot to me. Add to that de aggregation/disaggregation of products: is the newspaper worth a buck? is each article worth five cents? and so on... the pricing isn't clear anymore, when you had your newspaper for a dollar.
So, in my opinion, while having control of content in the hands of the customers and getting rid of subscriptions is fine, I think there's a lot to be fixed in the current schema of micropayments...
When you contest payment with your bank, what happens? Well, you talk to an actual live human being, who will do actual human things, and make a decision on whether to refund you the money and whether to prosecute a third party. And your transaction fees pay his salary.
What happens when you contest something with PayPal? You drop them an email (good luck trying to talk to anyone), and then they freeze your account, sieze (i.e. spend) your money, and (if they're feeling particularly communicative) tell you to go screw yourself. They do that not because they're evil (although they probably are) but because they simply don't make enough margin on their transactions to be able to afford to investigate them, and because they know that it's not worth anyone's time to sue them, even in small claims court, for the contested amounts.
Now, when the transaction value drops to 1 cent, what's the best case margin on that? You've got purchase and maintenance costs on your servers and database, plus bandwidth costs for those 128bit SSL encrypted transaction details that fly both ways. Half a cent? More if you handle a lot. A loss if you don't handle enough to amortize your setup costs.
Now, how many fraudulent transactions do you have to have - from a single source - before it's worth taking any action? It costs ten cents for a staffer to click on a button, so you're talking twenty transactions. If the staffer has to think at all, it's a hundred. If they have to do any investigatation at all - for example, to decide if a bunch of transactions are from a single source - it's thousands. If you want to hand it over to a lawyer or other third party, it's tens or hundreds of thousands.
But that's fantasy land, because it's not worth even recording the details of the transaction that would allow you to decide if it was fraudulent or not. The logs themslves would take a huge chunk out of your profit. You'd simply have to trust the referrer.
Well, that's not working out too well for credit cards right now, but at least cc issuers can pass back all the costs to online retailers for credit card fraud.
But if it's not worth your while even retaining transaction records for micropayments, or to investigate fraud after the fact, how are you going to protect themselves from fraud?
I suspect that you're not. It comes down to the equation of whether it's worth anyone's time to crack the system. Well, as thousands of open source projects, white hat hobbyist hackers, and karma systems show, lots of people don't put a dollar value on their time. And given that the chances of being caught are minimal, well, why not give it a go? After all, it's only avoiding a penny a time. Who can that hurt?
Any popular micropayment system will (I suggest) be defrauded, and the costs will come right out of the payment backer's pocket. We've seen how PayPal deals with that; ignore it. Don't answer the 'phones. Freeze the account, and spend the money in it. With micropayments, who's going to even bother complaining? And if they do, how much are they going to have in their account? $5? It's barely even worthwhile seizing that, and not worthwhile at all if you have to send or even read a letter.
There is simply no compelling reason for anyone to manage micropayments, other than as a tool of desperation to prop up a flagging or non-existent business model (*cough* slashdot *cough*). There's precious little profit to be made from it, and a lot of opportunity to be scammed so badly that you won't even realise that you're bankrupt until you total the figures at the end of the year and find out that most of your payments came from Mr M. Mouse.
I suspect that it's good old fashioned economics that are stopping any of the big financial institutions from implementing mi
If you were blocking sigs, you wouldn't have to read this.
don't make me figure out prices and charge me for access, just let me set up a monthly account and easily give a tip if i like something. i.e. you put a "tip the author of this" selection under the right mousebutton/click n' hold menu. bonus points for making it work it work for mp3s, pdfs, web pages, /. posts or even listserv posts.
http://usprogressives.org/ - redesign democracy.
It is not so much the absurd notion that everything on the net is free, it is the simple fact that whatever your are about to access and pay a micropayment for, is more then likely available free somewhere else. This is why micropayments are failing. It would take a cartel of thousands of members in a common field working together to get a critical mass before micropayments will go anywhere, or a very specific niche location. Cell phone ringer sites are a textook example. There are pay-for play but there are tons of free ones also. The users paying are doing so because they do not know about the free ones, or they like the content on certain pay sites. If you run a pay site, you better hope it offers something unique because most people will eventually find the free ones.
Bad boys rape our young girls but Violet gives willingly.
Most of my transactions are bigger than micro but not all.
Anyway to show one good use of micropayments I will pay the first 10 people to mod me up, advise me of your e-gold account number (and if you have 1mdc the initials for the account), allow me time to pay you, I am working and on the road.
Here is a freebie to get you started...
I have another interest in anonymous money, but that is another subject, if interested google should show my interests or if your even slacker, email me.
This is my sig, exciting huh!